Trade

Changed world conditions have prompted a new foreign policy and
new approaches to the other areas of international economic policy.
They require a fresh look at our trade policy as well.

The central issue is, simply, whether the U.S. should continue to
pursue a liberal trade policy. Leadership for freer trade has been a
cornerstone of our foreign policy through six administrations and
nineteen Congresses. For thirty-seven years we have considered a
liberal trade policy to be in the U.S. national interest. But events in
1970, particularly the failure of the Congress to enact the modest but
liberal trade bill proposed by the administration and the near passage
of protectionist trade legislation instead, demonstrated graphically
she challenge to this traditional course.

Whether we continue a liberal trade policy in the l970s or not will
have a profound impact at home and abroad. This administration is
committed to the principles of free trade. We recognize that our
preponderant size in the world economy gives us an international
responsibility to continue on this path just as we have an international
responsibility to manage our domestic economy well. I am convinced
that liberal trade is in both our domestic economic interest and our
foreign policy interest.

Trade benefits our economy in numerous ways. Imports broaden
the range of products which is available to our consumers. They help
maintain the competitive incentive for our own industries to achieve
maximum efficiency and productivity. This plays an important role in
our effort to restore price stability as we move toward full employ-
ment.

In addition, export earnings are crucial to many sectors of the U.S.
economy, particularly our agricultural community, which sells one-
fourth of its harvested acreage abroad and many of our highly productive
industries. Our firms, workers and farmers can maximize their
prosperity only in a world in which their products can be sold as
freely in other nations as they can within our own borders. We would
hobble their efforts to do so if we were to impose import restrictions,
because these would surely spark counterrestrictions on our own
exports as well as impair the overall competitiveness of the U.S.
economy.

The domestic benefits of liberal trade are reinforced by the pervasive
impact of our trade policy overseas.

Because of the world's commercial interdependence, restrictions in
one nation adversely affect the economic and social welfare of many
others. Political repercussions within those countries inevitably fol-
low, and the resulting cycle of recrimination and retaliation poisons
political as well as economic relations:

Liberal trade policies are fundamental to our relations with the
industrialized countries of Europe, Japan and Canada, our major
trading partners. We rely on one another's markets for billions of
dollars of sales annually. Our economic relations with these countries
are inseparable from our political and military relations; they are a
crucial element in our partnership.

Trade policy deeply affects our relations with the lower income
countries. Assured access for their exports in the markets of the
industrialized nations is crucial for their successful development. Indeed,
healthy trade is one of the prime goals of our assistance programs.

It has important implications for our relations with Communist
countries. Only they would benefit from a breakdown of economic
cooperation in the non-Communist world and the resulting fissures in
other fields.

A continued liberal trade policy, in short, is indispensable to our
domestic economic health and to a successful U.S. foreign policy. A
retreat from our historic policies would greatly harm those broad
international interests which we can further only with others' cooperation.

But there are strong voices in this country which maintain that
liberal trade policies no longer serve our national interest. They raise
serious questions, though the challenge to liberal trade policies which
hey pose has been greatly strengthened in recent years by the abnormal
increase in imports caused by our domestic inflation and the
policies and practices of some of our major trading partners.

To answer these questions within the framework of a liberal trade
policy, to mesh our trade policy with the world of the l970s, we have
moved on two fronts. First, the new Council on International Economic
Policy will take up trade policy as one of the first priority items
on its agenda. Secondly, the Commission on International Trade and
Investment, chaired by Mr. Albert Williams, which I appointed last
year to study the major issues of trade and investment policy, will
shortly report its recommendations to me. From these two groups
should emerge any new approaches which are needed.

One conclusion is already clear: Our trade policy problem is not
ours alone. It is truly international in scope. We and other countries
hall all move toward freer trade together or we shall all retreat to
protectionism together. Restrictionist policies in one country reinforce
restrictionist pleas in another and weaken the case of those who
defend freedom of trade.

The U.S., of course, maintains its own range of trade restrictions,
a fact which is often conveniently forgotten by those who focus on the
barriers maintained by others. And, to be sure, we must be mindful
of the need to mitigate the disruptive effects on particular U.S.
industries which can sometimes be caused by sharp increases in
imports.

But we cannot remove our barriers unless other countries are willing
to eliminate theirs on a truly reciprocal basis. For those who
question our traditional trade policies can often point to the practices
of some of our major trading partners. Too often some of these
policies have been set without regard to the interests of other countries,
including the United States. Some of them have not responded
adequately to requests for change from other countries, including the
U.S.

This past year's events have not been encouraging for those who
support a liberal trade policy. In my report a year ago, I noted three
main tasks for trade policy in the immediate future:

Passage of the trade bill I submitted in 1969, which would have
maintained momentum for a liberal trade policy.

Progress in the international negotiations on nontariff barriers and
impediments to agricultural trade.

Successful resolution of the international negotiations on tariff preferences.

Only the last was achieved in 1970. The failure of the administra-
tion's trade bill and the near success of protectionist legislation in the
Congress were closely related to the slow pace of the international
negotiations on trade barriers. These developments make clear that
other countries can no longer proceed on the facile assumption that
no matter what policies they pursue, liberal trade policies in the U.S.
can be taken for granted.

Thus, international cooperation is absolutely essential if we are to
maintain a liberal trade policy in the United States. Our full support
for the European Community continues, but its policies -including
those related to the expansion of its membership, which we also
support- must take full account of our legitimate economic interests.
We look to the community, as the world's largest trading entity, to
assume an ever greater responsibility for the maintenance of a liberal
world trading order by pursuing liberal policies itself, and by playing
a more active leadership role in seeking ways to further reduce the
femaining barriers to trade. Similarly, Japan should continue its rapid
reduction of the trade and investment restrictions which have long
been inappropriate for the second largest national economy in the
non-Communist world. It is essential that all other industrialized
countries cooperate in this effort as well.

In 1970 we took a number of concrete steps on our own to further
w'ur trade policy objectives. Barriers against our exports continued to
fall, as tariff reductions previously agreed were placed in effect and as
we continued to press for the elimination, or at least reduction, of
nontariff obstacles to trade. To keep open markets for our agricultural
exports, we vigorously urged the European Community to reduce its
grain prices and to avoid taking any measures which might threaten
our sales of soybeans, tobacco and citrus. We sought modifications in
the agricultural policy changes proposed by the United Kingdom. We
invoked our rights in the GATT (General Agreement on Tariffs and
Trade) against the preferential trading arrangements and changes in
citrus and tobacco import policies recently initiated by the European
Community. We will maintain and intensify these efforts in the year
ahead.

Meanwhile we moved to cushion the adverse domestic impact of
grade competition without resorting to legislated import restrictions.
We tightened our administration of the antidumping laws to protect
our industries against unfair pricing by their foreign competitors. We
patiently sought a solution to our textile import problem through
negotiations with the Japanese and other Far Eastern suppliers, although
in this unique case we also came to support quota legislation
in view of the disappointing progress in the negotiations; we maintained
the voluntary restraint programs on meat and steel exports to
the U.S., and we negotiated new tariff quotas on imports of stainless
steel flatware from Japan.

Pressures for legislated import restrictions have been fueled in past
years by the failure to use two more positive alternatives available to
US: the escape clause which provides for temporary relief from import
competition for entire industries in cases where injury can be clearly
demonstrated; and the adjustment assistance provisions of our trade
legislation, which provide financial and technical assistance to individual
firms and workers injured by imports.

In 1970, we used these alternatives. I accepted the Tariff Commission's
findings in all three cases in which it found injury to U.S.
industries from imports. I extended tariff relief in three escape-clause
cases. I ordered adjustment assistance for three industries and for a
number of specific firms and groups of workers. And the trade bill
which I submitted in late 1969, and supported through 1970, would
have made these statutory alternatives more readily available in cases
of real need without opening them so wide as to provide an avenue
for unjustifiable pleas for protection.

We have therefore demonstrated that there are several viable alternatives
to legislated import restrictions, and that we can and will use
them effectively. We will defend U.S. trade interests vigorously. And
we have therefore demonstrated that a continuation of our historic
policy of liberal trade is both possible and profoundly in our national
interest. But, in addition to our own actions, we must look to our
major trading partners -especially the European Community, which
when expanded in membership will account for almost one-half of all
world trade- to take actions, and perhaps even new initiatives, which
would enable us all to move decisively in this direction together.